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Nano-style iPhone rumor bolstered

A JP Morgan analyst is backing up rumors of an iPod nano-style iPhone that …

As you may remember from last Friday's Apple Links, Apple recently filed a patent that seems to indicate that Apple is at least exploring the idea of an iPhone nano. JP Morgan analyst Kevin Chang is reporting that unnamed sources in the supply channel are backing up the rumors that accompanied the release of the patent. The information apparently indicates that this new device would be a smaller, cheaper version of the iPhone that would use an input system closer to the existing iPod click-wheel instead of the iPhone's touchscreen. Chang also believes this new device would replace the existing nano.

We believe that iPod Nano will be converted into a phone because it's probably the only way for Apple to launch a lower end phone without severely cannibalizing iPod Nano.

And for me, that's the rub. What makes me most skeptical of this rumor is that it all hinges on Apple wanting to break into the lower end in order to gain market share.

Because of the anticipated lower price, 2008 sales of 30 million to 40 million units "is achievable," according to Chang.

Sales of the iPhone are expected to be limited to a small percentage of the market due to its high price tag, particularly in the United States where 85 percent of consumers tend to spend $100 or less on cell phones.

Apple has historically eschewed the low-end, preferring the margin-rich higher-end of the spectrum. If the history of the iPod itself is any indication, Apple will only go after the low-end when the more full-figured iPhone has saturated its market completely.